The Declaration of War Passed the Congress, But Divisions Remained

President James Madison, whose move toward war against Britain was controversial. Library of Congress

Updated June 22, 2015.

When the United States declared war against Britain in June 1812, the vote on the declaration of war in the Congress was fairly close, reflecting how unpopular the war was to large segments of the American public.

Though one of the main reasons for the war had to do with the rights of sailors on the high seas and the protection of American shipping, the senators and representatives from the maritine states of New England tended to vote against the war.

Sentiment for war was perhaps strongest in the western states and territories, where a faction known as the War Hawksbelieved that the United States could invade present day Canada and seize territory from the British.

The debate about the war had been going on for many months, with newspapers, which tended to be highly partisan in that era, proclaiming pro-war or anti-war positions.

The declaration of war was signed by President James Madison on June 18, 1812, but for many that did not settle the matter.

Opposition to the war continued. Newspapers blasted the Madison administration, and some state governments went so far as to essentially obstruct the war effort.

In some cases opponents to the war engaged in protests, and in one noteworthy incident, a mob in Baltimore attacked a group which opposed the war. One of the victims of the mob violence in Baltimore, who suffered serious injuries from which he never fully recovered, was the father of Robert E. Lee.

The following is a guest post by Steven Horwitz, Charles A. Dana Professor of Economics at St. Lawrence University.

Perhaps because money and finance are among the most complex and obscure parts of economics, a variety of cranks and conspiracy theorists have historically aimed their arguments against any number of monetary institutions and practices. In the last hundred years, the US Federal Reserve System has been the subject of many wild stories about its origins and ongoing operation. The Fed is believed by some to be part of the supposed international Jewish banking cartel of long-standing legend. For others it is part of the supposed empire of the Rothschilds, and for yet others it is part of a plot by private bankers to control the US government. Even among those who don’t subscribe to the more outrageous of these views, there are many who refer to the Fed as a “private bank” that has inappropriate influence over the US economy.

It is not possible to address every one of these stories about the Fed in detail, but what can be done is to offer a history of the Fed and a brief description of its structure that provides an alternative narrative about its origins and operations. That narrative relies on standard histories of both the US monetary system and the Progressive Era of US history. The result is a story that situates the Fed as just another example of Progressive Era zeal for a larger role for the administrative state, which would remedy the supposed failures of capitalism by relying on well-meaning experts to execute its policies.

Like other legislation of that era, the Fed was a government intervention supported both by ideologically-motivated and well-meaning reformers and by the industry being regulated. Rather than being this as some sort of unique conspiracy to take control of the US monetary system, it was a story very similar to those found in the history of everything from railroad regulation, to meatpacking regulation, to the regulation of monopolies and trusts as historians from Gabriel Kolko onward have documented. Unique historical factors in the monetary system affected the particular form the Fed took, but its broad history places it squarely in the tradition of the Progressive Era. If the Fed is the product of some nefarious conspiracy, so is a whole bunch of other legislation passed around that time.

The Fed emerged not as a response to failures of a free market in banking, nor as the result of shadowy banking conspiracies, but instead as a response to the failures of the National Banking System (1863-1913) that preceded it. The US banking system has never been a free market, as the National Banking System (NBS) was itself a response to pre-existing state-level regulations on banking. Under the NBS, and many of the state systems that came before it, banks were subject to three major regulations: 1) limits on the ability of banks to operate branches; 2) minimum reserve requirements; and 3) requirements that banks that produced currency buy up certain bonds or other financial assets as collateral.

Jun 8, 2016

OPINION – America! For more than 250 years the word has represented hope, opportunity, a second chance, and freedom. In America the accident of a man’s birth did not have to serve as an inescapable weight that dictated a person’s fate or that of his family. The American identity is shaped, not predetermined. We are a society of the free.

Once a newcomer – the immigrant – stepped on American soil he left the political tyrannies and economic barriers of the “old world” behind. A willingness to work hard and to bear the risks of one’s own decisions, the possession of a spirit of enterprise, and a little bit of luck were the keys to the doors of success in their “new world” home.

Visitors from Europe traveling to America in the nineteenth century, Frenchmen like Alexis de Tocqueville and Michel Chevalier, marveled at the energy and adaptability of the ordinary American. An American paid his own way, took responsibility for his actions, and showed versatility in the face of change, often switching his occupation, profession, or trade several times during his life, and frequently moving about from one part of the country to another.

American Ideals Don’t Need Regulating

What’s more, individual Americans demonstrated a generous spirit of charity and voluntary effort to assist those who had fallen upon hard times, as well as to deal with a wide variety of common community services in their cities, towns, and villages.

Those foreign observers of American life noted that no man bowed to another because of the hereditary accident of birth. Each man viewed himself as good as any other, to be judged on the basis of his talents and abilities as well as his character and conduct as a human being.

Even the scar of slavery that blemished the American landscape through more than half of the nineteenth century stood out as something inherently inconsistent and untrue to the vision and conception of a society of free men laid down by those Founding Fathers. The logic of liberty meant that slavery, and all other denials of equal rights before the law, would eventually have to end, in one way or another, if the claim of freedom for all was not to remain confronted with a cruel hypocrisy to the ideal.

A Free America’s Wondrous Fruits

What a glorious country this America was. Here was a land of free individuals who were able to pursue their dreams and fulfill their peaceful desires. They were free men who could put their own labor to work, acquire property, accumulate wealth, and fashion their own lives. They associated on the basis of freedom of exchange, and benefited each other by trading their talents through a network of division of labor that was kept in order through the competitive processes of market-guided supply and demand.

In this free marketplace, the creative entrepreneurial spirit was set free. Every American was at liberty to try his hand, if he chose, to start his own business and devise innovative ways to offer new and better products to the market, through which he hoped to earn his living. No man was bond to the soil upon which he was born or tied to an occupation or profession inherited from his ancestors. Every individual had an opportunity to be the master of his own fate, with the freedom to move where inclination led him and choose the work that seemed most profitable and attractive.

The Economistrecounts the turmoil the U.N. is now going through trying to elect a new secretary-general. Aside from the usual bickering and reciprocal blocking of candidates among the five nations with veto power, voices from inside the organization have recently revealed other problems, including the “colossal mismanagement” of peacekeeping budgets and a “sclerotic personnel system.” On the one hand, it is clear that these latter issues arise from the bureaucratic nature of the organization, which is bound to prove impossible to manage in an efficient manner. However, the broader problem the U.N. and its secretary-general are confronted with is one of credibility, after having missed almost every opportunity to provide a resolution to conflicts across the world over the last decades, from Rwanda to Sudan and Sri Lanka. While some other international organisations such as the IMF and the World Bank retain some (misguided) popular trust, the United Nations appears to almost all discerning eyes as a grand-scale failed endeavor.

It’s easy to assume that bureaucracy has single-handedly brought the U.N. down, but a more nuanced explanation can be found in Mises’s writings, which provide us with insights into the ideological foundations on which the U.N.—and its interwar predecessor, the League of Nations—were established. Mises (1943a, 1943b) writes:

The noble-minded founders of the League of Nations… were right in their idea that autocratic governments are warlike, while democratic nations cannot derive any profit from conquest and therefore cling to peace. But what President Wilson and his collaborators did not see was that this is valid only within a system of private ownership of the means of production, free enterprise, and unhampered market economy. Where there is no economic freedom things are entirely different.

Ours is not an age of laissez fare, laissez passer, but an age of economic nationalism. All governments are eager to promote the well-being of their citizens or of some groups of their citizens by inflicting harm upon foreigners. Foreign goods are excluded from the domestic market or only permitted after the payment of an import duty. Foreign labor is barred from competition on the domestic labor market. Foreign capital is liable to confiscation. This economic nationalism must needs result in war, whenever those injured believe that they are strong enough to brush away, by armed violent action, the measures detrimental to their own welfare. […] Economic nationalism is the corollary of the present-day domestic policies of government interference with business and of national planning as free trade was the complement of domestic economic freedom.

NOTHING THAT LENIN OR STALIN IMPLEMENTED IN SOVIET RUSSIA OR MAO IN CHINA, FOR EXAMPLE, WAS NOT CALLED FOR OR IMPLIED IN MARX’S OWN WRITINGS AND ARGUMENTS. FOR THE SOCIALIST HORRORS OF THE 20TH CENTURY, THERE IS ONLY ONE VERDICT TO BE PRONOUNCED AGAINST MARX: GUILTY AS CHARGED.

Some people may have missed it on their calendar, but May 5th was Karl Marx’s birthday. It is worth recalling, also, that there was a time when Marx was an anti-communist.

Karl Marx was born on May 5, 1818 in the German Rhineland town of Trier, and died on March 14, 1883 in London.

It is said that by its fruit you will know the tree. The last one hundred years is a clear testament to the consequences of Marx’s influence on modern history.

Accepting the “classical” labor theory of value, he concluded the workers were “exploited” by the “capitalists.” Marx claimed that “profit” was a portion of the workers’ output extracted by the property owners as the “price” the workers had to pay to have access to the privately owned physical means of production, without which they could not produce and survive.

The Austrian economist, Eugen von Boehm-Bawerk, demonstrated that Marx had confused “”profit” with “interest.” In a competitive market, profit is a temporary discrepancy between selling price and costs-prices, eventually competed away by businesses bidding up wages for workers (and other resource prices) to work for them, and those same businesses then competing for consumers to buy their output by offering their wares at better selling prices than their rivals.

What Marx had failed to fully understand was that production takes time, and that if workers would not or could not wait until the product was finished and sold to consumers to receive their wages, then someone had to “advance” those wages to them over the production period.

That, Boehm-Bawerk showed, is what the employers did, so that what workers received while working was the discounted value of their marginal product. The “gain” received by employers over their costs of production, even in long-run equilibrium, was the implicit interest for having ‘waited” for the product to be finished and sold, when they might have done other things with the “savings” they had advanced to those workers during the period of production.

If it is recognized that “time” has value, and, therefore, an intertemporal price, the notion that workers were or could be “exploited” in open, competitive markets for resources and finished goods was fundamentally wrong.

On this foundation of sand, Marx constructed his theory of the “injustice” of capitalism that has, in various forms, continued to plague the ideas and policies of countries around the world.